Redefine Properties sticks by KPMG
The decision to dump KPMG amid the Gupta scandal hinges on the outcome of probes into the conduct of the firm, and bizarrely, shareholder approval.
Redefine Properties CEO Andrew König said continuing to do business with KPMG South Africa “is the right thing” until the conclusion of multiple investigations into the conduct of the audit and advisory firm.
Dropping KPMG as Redefine’s external auditor would also be the “prerogative” of the property company’s shareholders, said König.
“We have reached out to shareholders so we can discuss the matter and for them to inform us on continuing the relationship with KPMG,” said König on Monday at the company’s results presentation for the year to August 31, 2017.
“We have been reviewing our relationship [with KPMG] and met with the senior partners of the firm. We are grappling with making a fair and balanced opinion.”
Redefine is the fourth-largest property company on the JSE with a market capitalisation of R61.7 billion at the time of writing.
König suggested that the decision for Redefine’s on-going relationship with KPMG should be approved by shareholders and is not a decision solely taken by the audit and risk committee on its board. The committee has a function – among others – of maintaining a company’s integrity in financial statements, compliance to regulations and the performance of internal and external audits.
A local asset manager, who did not want to be named, questioned Redefine’s move to refer the decision to dump KPMG to shareholders instead of its board and management making the decision independently – like other firms have done recently.
Redefine’s relationship with KPMG spans over a year. The company replaced Grant Thornton with KPMG as its auditor last year.
In September, KPMG revealed that it missed red flags in its auditing of Gupta-owned companies and also withdrew parts of its controversial report on the South African Revenue Service’s (Sars) so-called “rogue unit”.
Redefine’s executive chairman Marc Wainer recently told Moneyweb that he was “shocked” at KPMG’s own findings, especially the part about Sars’ “rogue unit”. Wainer said Redefine could consider dumping KPMG after the company concluded its year-end financial results audit (its audited results were published on Monday in which dividends grew by 7% to 92 cents a share for the year to August 2017).
KPMG’s future hangs in the balance as it faces two investigations from the Independent Regulatory Board for Auditors (Irba) and Companies and Intellectual Property Commission, which are probing the conduct of KPMG’s directors and whether the firm flouted regulations in its audit of Gupta-linked companies.
Both bodies will continue their investigations despite the conclusion of KPMG’s own probe.
Since the explosive findings from KPMG’s internal probe, several JSE-listed companies have severed ties with the audit and advisory firm. These include fashion retailer The Foschini Group, investment bank Sasfin Bank, energy investment firm Hulisani, and diversified retail group AVI. Asset management firm Sygnia Asset Management was the first to drop KPMG.
Transport and logistics company Imperial Holdings said it was reviewing its relationship with KPMG while telecommunications company Telkom said it would not award any new business to KPMG until the findings of the Irba probe are known.
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